Insurers Get Simplified Automatic Consent Procedures for 1 Tax Year

Insurers Get Simplified Automatic Consent Procedures for 1 Tax Year

Internal Revenue Service

The IRS has provided (Rev. Proc. 2019-34) simplified procedures for an insurance company to obtain automatic consent to change its accounting methods for life insurance reserves, amounts under <a href="/research/federal/usc26/807#cnlm-0000015" resolve="/lr/resolve//cnlm#cnlm-0000015">section 807(c)(3)</a>, and specified policy acquisition expenses under section 848 to comply with <a href="/research/federal/usc26/807" resolve="/lr/resolve//cnlm">sections 807</a> and 848 for the first tax year beginning after December 31, 2017. Rev. Proc. 2019-34 provides simplified procedures to reduce administrative and compliance burdens on insurance companies affected by the Tax Cuts and Jobs Act's changes to <a href="/research/federal/usc26/807" resolve="/lr/resolve//cnlm">sections 807</a> and <a href="/research/federal/usc26/848" resolve="/lr/resolve//cqf3">848</a>. Rev. Proc. 2019-34 generally is consistent with the simplified procedures provided in <a href="/lr/resolve//29sly">Rev. Proc. 2019-30</a> for an insurance company to obtain the automatic consent to change its accounting methods for discounting unpaid losses and expenses unpaid, estimated salvage recoverable, and unearned premiums attributable to title insurance. However, the timing of the issuance of Rev. Proc. 2019-34, which is only available for one tax year, may create challenges for an insurance company that has already prepared its tax return for the first tax year beginning after December 31, 2017. Rev. Proc. 2019-34 provides accommodations for these insurance companies. Rev. Proc. 2019-34 applies to any insurance company that changes its accounting method to comply with the applicable changes to <a href="/research/federal/usc26/807" resolve="/lr/resolve//cnlm">sections 807</a> or <a href="/research/federal/usc26/848" resolve="/lr/resolve//cqf3">848</a> if specified terms and conditions are met and the applicable procedures described in the guidance are met. Specified limitations under <a href="/lr/resolve//dppt">Rev. Proc. 2015-13</a> do not apply to a change in method of accounting made under Rev. Proc. 2019-34. Thus, an eligible insurance company may make a change in accounting method even if the requested year of change is the final year of the insurance company’s trade or business or the company engages in a liquidation or reorganization transaction to which section 381 applies. Rev. Proc. 2019-34 also addresses how the audit protection under <a href="/lr/resolve//dppt">Rev. Proc. 2015-13</a> applies to a change in accounting method under Rev. Proc. 2019-34. A transition rule applies for a taxpayer that properly filed, before August 26, 2019, a Form 3115 under the nonautomatic change procedures in <a href="/lr/resolve//dppt">Rev. Proc. 2015-13</a> requesting consent for a change in accounting method described in Rev. Proc. 2019-34. If the form is pending on August 26, the taxpayer may choose to make the change in accounting method under the automatic change procedures in Rev. Proc. 2019-34 and <a href="/lr/resolve//dppt">Rev. Proc. 2015-13</a>, if otherwise eligible. Rev. Proc. 2019-34 is effective for an insurance company’s first tax year beginning after December 31, 2017. <a href="/lr/resolve//281c3">Rev. Proc. 2018-31</a> is modified to provide that section 26.04 of Rev. 2018-31 is inapplicable to any change in accounting method to which <a href="/lr/resolve//29sly">Rev. Proc. 2019-30</a> or Rev. Proc. 2019-34 applies.

The IRS has provided (Rev. Proc. 2019-34) simplified procedures for an insurance company to obtain automatic consent to change its accounting methods for life insurance reserves, amounts under section 807(c)(3), and specified policy acquisition expenses under section 848 to comply with sections 807 and 848 for the first tax year beginning after December 31, 2017.

The IRS has provided (Rev. Proc. 2019-34) simplified procedures for an insurance company to obtain automatic consent to change its accounting methods for life insurance reserves, amounts under section 807(c)(3), and specified policy acquisition expenses under section 848 to comply with sections 807 and 848 for the first tax year beginning after December 31, 2017. Rev. Proc. 2019-34 provides simplified procedures to reduce administrative and compliance burdens on insurance companies affected by the Tax Cuts and Jobs Act's changes to sections 807 and 848. Rev. Proc. 2019-34 generally is consistent with the simplified procedures provided in Rev. Proc. 2019-30 for an insurance company to obtain the automatic consent to change its accounting methods for discounting unpaid losses and expenses unpaid, estimated salvage recoverable, and unearned premiums attributable to title insurance. However, the timing of the issuance of Rev. Proc. 2019-34, which is only available for one tax year, may create challenges for an insurance company that has already prepared its tax return for the first tax year beginning after December 31, 2017. Rev. Proc. 2019-34 provides accommodations for these insurance companies. Rev. Proc. 2019-34 applies to any insurance company that changes its accounting method to comply with the applicable changes to sections 807 or 848 if specified terms and conditions are met and the applicable procedures described in the guidance are met. Specified limitations under Rev. Proc. 2015-13 do not apply to a change in method of accounting made under Rev. Proc. 2019-34. Thus, an eligible insurance company may make a change in accounting method even if the requested year of change is the final year of the insurance company’s trade or business or the company engages in a liquidation or reorganization transaction to which section 381 applies. Rev. Proc. 2019-34 also addresses how the audit protection under Rev. Proc. 2015-13 applies to a change in accounting method under Rev. Proc. 2019-34. A transition rule applies for a taxpayer that properly filed, before August 26, 2019, a Form 3115 under the nonautomatic change procedures in Rev. Proc. 2015-13 requesting consent for a change in accounting method described in Rev. Proc. 2019-34. If the form is pending on August 26, the taxpayer may choose to make the change in accounting method under the automatic change procedures in Rev. Proc. 2019-34 and Rev. Proc. 2015-13, if otherwise eligible. Rev. Proc. 2019-34 is effective for an insurance company’s first tax year beginning after December 31, 2017. Rev. Proc. 2018-31 is modified to provide that section 26.04 of Rev. 2018-31 is inapplicable to any change in accounting method to which Rev. Proc. 2019-30 or Rev. Proc. 2019-34 applies.

Sec. 446 General rule for methods of accounting

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Insurers Get Simplified Automatic Consent Procedures for 1 Tax Year